St. Olaf Magazine | Spring/Summer 2023

Monetary Policy Minds

Over the past year, inflation in the United States soared to the highest levels since the 1980s — and consumers felt the pinch of steeper prices everywhere from the grocery store to the gas pump.

This 40-year inflation high has started to ease in recent months. That is due in large part to the fact that central banks around the world — including the Federal Reserve in the U.S. — have taken aggressive measures to tighten monetary policy.

It’s not easy work. To bring down inflation, the Federal Reserve has been raising interest rates, which makes borrowing more expensive and leads families and companies to spend less money. This, in turn, causes prices to stop rising so rapidly. But as The New York Times noted last summer, “It is very hard for the Fed officials to get the balance right.” They are trying to cause a large enough decline in spending to reduce inflation but not such a large decline that the economy falls into a recession, says St. Olaf Assistant Professor of Economics Marcus Bansah. And the measures the Fed has taken to curb inflation can also have unintended consequences, as evidenced by the threat of turmoil in the national and global banking systems.

This balancing act requires leaders at the Federal Reserve to not only analyze complex data, but also anticipate the impact of global events and the actions of political leaders and private companies. They need the ability to think critically, evaluate an issue from a wide range of perspectives, and communicate effectively with a large swath of the general public that doesn’t understand the complicated nuances of macroeconomics. In many ways, it’s the perfect line of work for graduates of the liberal arts. A number of St. Olaf alumni have roles in the Federal Reserve System. While their work and roles vary, their goal is all the same: to support a stable financial system for the world’s largest economy.

Elizabeth Holmquist '05. Photo by Christoph Hodel '20
Elizabeth Holmquist ’05. Photo by Christoph Hodel ’20

Elizabeth Holmquist ’05
Lead Financial Analyst
Federal Reserve Board of Governors
Washington, D.C.
Elizabeth Holmquist ’05 was in the inaugural class of St. Olaf College’s Center for Interdisciplinary Research (CIR), which brings statistics students and Oles from a range of majors together to work on research projects. For her project, Holmquist examined similarities between counties that experienced employment shocks and rebounds. She believes that opportunity was instrumental in her career path.

“I went to the Federal Reserve after St. Olaf, and I think that research experience was a big factor in how I got my position there,” Holmquist says. “The fact that as an undergraduate I had some experience doing this type of research showed that I was personally motivated and had some initiative.”

Her first job with the Federal Reserve was as a research assistant, mostly studying housing and real estate. She originally planned to pursue a Ph.D. in economics. But Holmquist soon changed her mind. “I found that I just really loved the fast-paced policy and data work,” she says.

She has stayed at the Federal Reserve for almost her entire career, working her way up from research assistant to financial analyst to senior financial analyst to lead financial analyst. She also spent a year as an economist at the International Monetary Fund before returning to the Fed.

In her current role, one of Holmquist’s main projects is working on a quarterly statistical release called the Financial Accounts of the United States. The report includes information on asset acquisitions across sectors of the economy, how those assets are funded, and more.

The data from these reports are used by others both in and outside the Federal Reserve to make forecasts, analyze the economy, do research, and complete additional work. A highlight of working on these reports has been creating a breakdown of the household balance sheet by wealth distribution. She’s now working on using financial accounts data to look at which sectors are lending or borrowing with other sectors by financial instrument.

“I don’t know anybody who could walk in the door knowing how to do this job,” Holmquist says. “There’s no school that would teach you all the skills and facts that you would need to be productive. You have to be skilled at learning, synthesizing complex information, and communicating, and you have to be comfortable with that. That’s what I feel like a liberal arts education prepares you to do.”

Sarah Rodman '21. Photo by Christoph Hodel '20
Sarah Rodman ’21. Photo by Christoph Hodel ’20

Sarah Rodman ’21
Research Assistant
Federal Reserve Board of Governors
Washington, D.C.
Sarah Rodman ’21 had never taken an economics class before her first year at St. Olaf. But after taking a course with Professor Emerita of Economics and Environmental Studies Rebecca Judge, she realized she loved thinking about economics as a lens to understand the world. It combined her math skill set with her interest in social issues and desire to answer important questions for society.

Just a few years later, Rodman is in Washington, D.C., working as a research assistant for the Federal Reserve. She’s part of a team that works to research and forecast government spending and government employment. It’s a small part of all the forecasting done by the Fed, Rodman says, but she finds it fascinating to see how each group’s work combines to produce the materials sent to the Federal Open Market Committee. The committee, led by Fed Chair Jerome Powell, meets eight times a year to determine U.S. monetary policy and assess the risks to its long-run goals of price stability and low unemployment.

Rodman started with the Federal Reserve last August just as the national debate about inflation started to become an everyday topic. She said joining this organization at this time has quickly made her realize how impactful the work is to people around the country.

“It makes the work feel a lot more important, especially because it’s being talked about all over the news and among lots of different people in my life,” Rodman says.

She believes her St. Olaf education has helped prepare her for success in the field and has given her advantages from the beginning.

“I had opportunities to do research and to gain very deep technical skills, especially coding,” Rodman says. “But then I also got more of the soft skills — communicating, critical thinking, synthesizing information from various perspectives, and adaptable learning. That’s one of the strengths that I see from my St. Olaf education in my work at the Fed — that balance of both of those types of skills. It sets me apart from others and has allowed me to quickly contribute valuable work to my team.”

Scott Thomas-Forss '85. Photo by Steven Garcia '20
Scott Thomas-Forss ’85. Photo by Steven Garcia ’20

Scott Thomas-Forss ’85
Vice President of Research Support and Information Services
Federal Reserve Bank of Minneapolis
Minneapolis, Minnesota
By the time Scott Thomas-Forss ’85 retired from the Federal Reserve Bank of Minneapolis in April, he was leading the operations of a division that includes more than 100 research and policy economists, research analysts and assistants, local and national research consultants, visiting scholars from around the world, and a team of highly trained operations support staff.

It was just one of the many leadership roles he held since joining the Fed in 1988. Over the course of his 35-year career with the central bank, he led teams in human resources, treasury retail operations, enterprise risk management, and business continuity, and he chaired the bank’s LGBTQ employee resource network. He also oversaw the training and communications for a large-scale project that standardized and modernized the national Federal Reserve System’s check-processing equipment and software onto a common operating platform.

A social work major at St. Olaf, Thomas-Forss didn’t set out to develop a lifelong career at the Federal Reserve when he took a job there a few years after college. But an appetite for lifelong learning — and a willingness to seek out and take on new challenges — led to an impressive tenure at the Fed.

“We have a very collaborative culture throughout all of the Federal Reserve districts across the country. We try to work together as a Federal Reserve System not just on monetary policy, but on all kinds of projects,” Thomas-Forss says. “A liberal arts degree from St. Olaf prepared me for working in that kind of environment because you learned to work on complex projects in groups, you learned to work with people who are very different from you, and that transfers well to a career at an organization like the Fed.”

He also notes that, like many Fed employees, he found satisfaction in knowing that his work was supporting the U.S. economy and the public’s best interest. “Each Federal Reserve district is independently operated and has their own board of directors, but we’re all working toward the same centralized mission. It’s a very service- and mission-driven organization, and many of our employees stay because they believe in the mission,” he says. “They’re supporting a stable economy in customer service roles, technology roles, finance, HR, bank examiners — all of those positions play a role in maintaining the stability of the economy within the United States.”

While St. Olaf has long prepared Oles for successful careers in economic research, finance, banking, and regulatory affairs, the college now offers a new quantitative economics major with a sharpened focus on those fields. The major has grown rapidly, thanks in part to a core group of young faculty members hired in the past few years. Read more about the new major here, and read below to learn more about the St. Olaf faculty at the heart of this work.

Marcus Bansah
Assistant Professor of Economics
St. Olaf College Assistant Professor of Economics Marcus Bansah teaches Contemporary Issues in Macroeconomics, Macroeconomic Theory, and International Economics, and he’s spoken to several media outlets in the last year for stories with headlines like “When should we worry about inflation?”

Currently in his third year at St. Olaf, Bansah enjoys teaching students how to connect the theories they’re learning in the classroom to the impact it has on the lives of the people around them. “There’s some inner joy that comes with the job as you sit down and talk about the issues of the day,” he says. “My role is to see our students grow in whatever they do and love it.”

In courses like Macroeconomic Theory and Contemporary Issues in Macroeconomics, students are introduced to monetary policy and its role in stabilizing the economy. They then combine the theory of what they are learning about inflation, economic growth, unemployment, recessions, and income inequality with current real-world examples. Students come to class ready to debate and analyze the topics through different lenses to achieve further understanding, and they learn how to write policy papers. Bansah says the level of economic analysis his students are doing is impressive, and their classroom discussions will help them when they land jobs in the real world or attend graduate school. “When you have this quality of students who are willing to learn and you are able to work with them, at the end of the day, they are getting training that is going to take them far,” Bansah says.

Allison Luedtke
Assistant Professor of Economics
In her Macroeconomic Theory and Money and Banking courses, St. Olaf College Assistant Professor of Economics Allison Luedtke teaches students to code using programming languages like Python.

“I think it’s really important for economics students to gain experience using computers to solve economic problems, because many if not most economics jobs require this,” she says.

Luedtke has published papers on financial networks as well as the pedagogy of incorporating programming into economics courses. At St. Olaf, she puts her expertise in both areas into practice. This summer Luedtke will lead a Collaborative Undergraduate Research and Inquiry (CURI) project that will give St. Olaf students hands-on experience using Python to analyze models of interbank lending and identify characteristics of lending relationships that make the financial sector more or less vulnerable.

“Financial networks have become even more relevant in recent months with the collapse of Silicon Valley Bank. People are concerned that their collapse will lead to cascading bank failures,” she says. “And if that doesn’t happen, what is different this time? Why were there cascading bank failures in 2008 when Lehman Brothers failed but not in 2022 when cryptocurrency exchanges collapsed? Which relationships protect or disrupt the financial stability of these networks?”

This summer, St. Olaf economics students will program the models and run simulations to look for those answers.